1. Chapter 07
NEW PRODUCT
DEVELOPMENT
PROCESS

2. Chapter Objectives
 In this chapter, we focus on the following
questions:
 What challenges does a company face in
developing new products?
 What organizational structures are used to
manage new-product development?
 What are the main stages in developing new
products, and how can they be managed better?
 What factors affect the rate of diffusion and
consumer adoption of newly launched products?

3. New Product Options
 MAKE or BUY
1. Company can buy other company
2. Acquire patent from another company
3. Buy a license or franchise from other
company

5. Types of new product
Six categories of new products
1. New-to-the-world products
2. New product lines
3. Additions to existing product lines
4. Improvements and revisions of existing
products
5. Repositioning
6. Cost reductions

6. Automobiles

7. Icecreams

8. Petroleum
 High Performance
petrol by Bharat
Petroleum
1. Improves engine
performance
2. fuel efficiency

9. Why do new products fail?
 A high-level executive pushes a favorite
idea
through in spite of negative research
findings.
 The idea is good, but the market size is
overestimated.
 The product is not well designed.

10.  The product is incorrectly positioned in the
market, not advertised effectively, or
overpriced.
 The product fails to gain sufficient
distribution coverage or support.
 Development costs are higher than
expected.
 Competitors fight back harder than

11. product
development
 Shortage of important ideas in certain areas
 Fragmented markets
 Social and governmental constraints
 Cost of development
 Capital shortages
 Faster required development time
 Shorter product life cycles

12. Organizing New-Product
Development
 Product managers
 New-product managers
 High-level management committee
 New product department
 Venture teams

13. New Product Development decision
Process

14. Managing the Development Process:
Ideas
Idea Generation
 Interacting with Others
1. Sales representatives
2. Intermediaries
3. Product champion

15. Managing the Development Process:
Ideas
Techniques for stimulating creativity in
individuals and groups
 Attribute listing
 Forced relationships
 Morphological analysis
 Reverse assumption analysis
 New contexts
 Mind-mapping

16.  Idea Screening
1. Idea manager
2. Idea committee
 Two types of errors in screening ideas
1. DROP-error
2. GO-error

17.  Some of the most notable “drop-errors”
have come from the most recognizable
names in American business. Xerox saw
the potential of the copy machine, IBM and
Eastman Kodak did not. IBM thought the
personal computer market would be
miniscule.Can you think of any“drop-
errors” that the company didn’t survive?

18. Managing the Development Process:
Concept to Strategy
 Concept Development and Testing
A. Product idea
B. Product concept
 Concept development
A. Category concept
B. Product–positioning map
C. Brand concept

19.  Concept Testing
1. Rapid prototyping
2. Virtual reality
3. Customer-driven engineering
 Questions to measure product dimensions
 Communicability and believability
1. Need level
2. Gap level
 Need-gap score

20.  Perceived value
 Purchase intention
 User targets, purchase occasions, purchasing
Frequency
 Conjoint Analysis- Example: five design elements
 Three package designs
 Three brand names
 Three prices
 Possible Good Housekeeping seal
 Possible money-back guarantee

21.  Marketing Strategy
 Business Analysis
 Estimating Total Sales
 Estimating Cost and Profits
1. Break-even analysis
2. Risk analysis

22. Managing the Development Process:
Development to Commercialization
 Product Development
 Quality Function Deployment (QFD)
 Customer attributes (CAs)
 Engineering attributes (EAs)

23. Market Testing
 Consumer-Goods Market Testing
 Seeks to estimate four variables
1. Trial
2. First repeat
3. Adoption
4. Purchase frequency
 Sales wave research

24.  funnel based model